1 day Ago By The Korea Herald
The US Federal Reserve on Wednesday kept its benchmark interest rate unchanged and signaled the possibility of two rate cuts this year, as it is cautiously assessing the ramifications of US President Donald Trump's tariff policies and other measures that have stoked economic uncertainties. After the two-day Federal Open Market Committee meeting, the central bank announced the decision to hold the rate steady at the 4.25 to 4.
50 percent range. The pause on cuts came after a quarter-percentage-point reduction each in December and November, and a 50-basis-point cut in September. FOMC members' new median economic projection showed the federal funds rate would be cut to 3.
9 percent at the end of the year, to 3.4 percent next year and to 3.1 percent in 2027.
In their previous December projection, they also forecast the rate would be lowered to 3.9 percent this year, penciling in two cuts for 2025. The Fed also expected the United States' gross domestic product to grow by 1.
7 percent this year, down from 2.1 percent projected in December. In addition, the latest median projection indicated that Personal Consumption Expenditures inflation may reach 2.
7 percent at the end of the year, higher than the December forecast of 2.5 percent. PCE is a measure of household consumer spending on goods and services in the US.
The Fed's decision to stand pat on the rate came amid concerns that Trump's expanding trade fight would affect progress in the fight against inflation. Fed Chair Jerome Powell said that a "good part" of the bank's higher inflation projection is related to tariffs. "Some of it .
.. the answer is clearly some of it, a good part of it, is coming from tariffs," Powell told a press briefing.
"But we'll be working ...
to separate non-tariff inflation from tariff inflation." Near-term inflation expectations have increased with tariffs being seen as a "driving factor," he pointed out. "Some near-term measures of inflation expectations have recently moved up.
We see this in both market and survey-based measures," he said. "And survey respondents, both consumers and businesses, are mentioning tariffs as a driving factor." Since taking office in January, Trump has made a series of tariff announcements, including the imposition of 25 percent tariffs on steel aluminum imports, starting a week ago, and a plan to levy country-by-country reciprocal tariffs to match what other countries impose on American goods.
This week's rate decision put the gap between the key rates of South Korea and the United States at up to 1.75 percentage points. (Yonhap).
